Landlord Debt Advisory: Case Settlement Process

Following on from my previous post where I introduced CD Fairfield Capital as a company and our property debt resolutions brands, my next posts are case studies, real-life client situations we have dealt with and resolved.

Our Professional Landlord client approached us via our www.landlorddebtadvisory.com website for advice. For the sake of anonymity, we shall call him Bob. Bob had overextended his borrowing,  purchasing 35 properties since 2004, refinancing several times to raise deposit funds for further purchases and so on. The challenges he was facing were:

  • Interest rate rises (2x 0.25% Bank of England rate rises since we initially took instruction – all mortgages on variable rates
  • The financial impact of Section 24 taxation;
  • Bob’s age, 53 – all mortgages were interest-only with varying expiry dates (2019 – 2031); there were no repayment vehicles in place
  • Miscellaneous costs such as rental void periods, repairs and maintenance, management fees and charges

The Financials;

Portfolio Value:                                                                        £5.12m

Outstanding Debt:                                                                  £5.93m

Expected Shortfall/Negative Equity:                           £810,000

Total Debt Written Off:                                                        £696,000

Total Settlement:                                                                      £114,000

There was a combination of properties with equity and those in significant negative equity.

Bob told us the catalyst for contacting us was a combination of unplanned repair bills and the realisation that any further interest rate rises deemed the portfolio unprofitable as his cash-flow position was already precarious (up until that point it had always made a profit, albeit a rather modest one).

There was also a serious concern for the family home. This property is also mortgaged, owned jointly with Bob’s wife and has significant equity.

Once instructed, we completed a detailed review to include:

  • Recalling all lender documentation (15 lenders) to review security
  • Completing a detailed Statement of Affairs and reviewing all relevant client documentation
  • Portfolio Valuation – 35 individual reports

After concluding this work the following was clear:

  • As Bob had suspected the portfolio was untenable; despite there being some cash available, any combination of the challenges highlighted would quickly absorb this reserve.
  • Some lenders had the right to consolidate against the equity in other properties if sold.
  • This venture would become loss-making Q4 2018 or Q1 2019, and significantly so.

The recommendation was made that all properties were to be sold with the exception of the family home (this is not always the case). The Move With Us network was appointed to address the asset management element of the case (various agents and locations through England and Wales) to commence in line with each lender’s specification.

As the majority of the properties were tenanted, management contract extensions were agreed (where applicable) to ensure consistency with incoming rent, and the properties marketed.

While marketing was ongoing, we provided all lender representation for Bob. Further to this a bespoke shortfall settlement package was offered and accepted on a pari passu basis amongst the lenders (in this case an IVA); the highlights being:

  • Bob retained his family home; we negotiated new terms with his existing lender on a full repayment basis (had previously been interest-only)
  • Bob avoided bankruptcy
  • The equity from the properties sold above the loan value formed part of the settlement (£74,000)
  • Bob also added £40,000 – a combination of his own savings and gifted funds from family to this sum ie total settlement paid £114,000, total debt written off £696,000
  • Our total fee for this work was £37,500 (typical fee for addressing a single property and settlement is £4,000; average shortfall debt write-off is £70,000+)
  • The timeframe from instruction to conclusion circa 18 months

The above case type is common. We receive dozens of enquiries per week from Landlords with similar circumstances and varying portfolio sizes, geographical locations and levels of equity. It’s often the case that the Landlord has already spoken to the lender(s), the Accountant, a Financial Adviser, Solicitor and/or an Insolvency Practitioner unfamiliar with the intricacies of individual lender shortfall policy.

We are the ONLY company of our type in the UK with the expertise, regulation, lender relationships and track record to complete complex, multi-faceted cases of this type in a commercial and client-focused manner.

Are you in Negative Equity? We can help!

There is a considerable amount of misinformation surrounding property debt and negative equity. The aim of this and subsequent articles is to provide an overview of how we have been assisting homeowners and landlords with property debt issues since 2012.

CD Fairfield was formed by Philip Davison (MD), and myself as a reaction to the fallout from the unprecedented property crash in Northern Ireland in 2008. At the time it was estimated that approximately 60,000 properties had mortgages greater than their value. The Council of Mortgage Lenders estimated the negative equity total to be circa £2.5billion.

Of course, this isn’t an issue for everyone in negative equity, but for those who need to sell for financial reasons or otherwise, many found themselves in a “bad debt” situation for the first time in their lives, and through no fault of their own.

The “party line” from Lenders and Government Agencies was to speak to your lender. I can tell you from significant experience that in many cases that is the last thing a borrower should ever do!

It was clear that a bespoke mediation service was required to take borrowers by the hand to not only guide them through this minefield but provide full representation, an end-to-end solution.

As well an being authorised and regulated by the Financial Conduct Authority we have an in-house Insolvency Practitioner, Edward Walsh, a member of the Chartered Accountants of Ireland and R3 (The Association of Business Recovery Professionals). We also have Senior Management who holds membership of the Insolvency Practitioners’ Association.

With these associations and levels of regulation, we have the full suite of debt solutions under one roof which includes:

  • Mortgage re-negotiations (with the existing lender)
  • Mortgage Mis-selling Claims
  • Informal/Negotiated Settlements
  • IVA (Individual Voluntary Arrangement)
  • Bankruptcy

We also recognised that there were a number of distinct differences based on whether we were helping homeowners or Landlords in Northern Ireland or in mainland UK. This being the case variations in brand were created as follows:

Negative Equity UK

Negative Equity NI

Landlord Debt Advisory

Get Help With Debt

What sort of results does Negative Equity UK achieve? This is a snapshot of some settled cases: Settled Cases

Our independent Client Review show an approval rating of 4.89/5.00

Securing successful outcomes for clients is front and centre in all that we do. How do we do this?

  • Developing and maintaining excellent working relationships with lenders
  • Recruiting highly competent staff from the legal, accountancy, insolvency, banking and financial services sectors
  • Continual investment in systems and people
  • We listen to our clients and implement constant improvement based on feedback

 

(up to April 2018)

In my next articles I’ll provide specifics; the mechanics of a case, the process that followed and the outcome for the clients.

 

Struggling With Debts In Belfast? Make 2018 The Year You Get Your Finances Back On Track.

Debt is a normal part of most people’s personal finances. Everyone relies on credit cards, over drafts, personal loans and mortgages at some point in their lives. Whether you’re renovating your house, paying for a holiday or just tiding yourself over until payday, everyone borrows.

For some people, however, debts can become unmanageable. Sometimes a pay cut or losing a job can make your repayments unaffordable. Sometimes low wages lead to chronic debt you can’t escape from.

Often people find their debt situation gets worse at the start of the New Year. Christmas spending on credit and store cards can add to existing debts, leaving you owing more than usual.

If this situation sounds familiar to you, then we can help. At Get Help With Debt, we can help you to write off thousands of pounds in debt and provide you with a range of options for dealing with the remainder.

For some clients a debt management plan might be what they need to get to grips with their debt. With a debt management plan, you will only have one monthly payment to make and you will only pay what you can afford until your debts have been cleared.

For others, an individual voluntary arrangement, or IVA, might be the best option. An IVA is a legally binding agreement between you and your lender and could make you debt free in as little as five years. We’ll stop your creditors from calling or writing to you to demand payments and freeze any late fees or charges you’ve incurred.

For a few clients, self-petition bankruptcy might be necessary. You will have to put any available disposable income you have towards this for three years, but you won’t have to deal with your creditors anymore and once your bankruptcy is completed you will be able to start fresh.

So, if you’re living in Northern Ireland and struggling with debt, whether your credit cards have gotten out of control, store cards are mounting up or you have a mortgage you just can’t afford, we can help you.Go online to www.gethelpwithdebt.co.uk and take our free online debt assessment or request a call back to discuss your situation and take the first step to becoming debt free.

Rising Household Debt Poses Risk To UK Economy.

Rising household debt, combined with stagnant wages, poses a major threat to the UK economy, according to the Organisation for Economic Co-operation and Development (OECD).

The OECD warned that personal loans such as credit cards presented a much greater risk of default compared to mortgages and said that worsening economic conditions could make repayments unaffordable for many borrowers.

The Paris based think tank said it expected UK growth to be the lowest of the G7 economies and that this will constrain wage growth, putting more pressure on already strained household finances.

It called for tougher affordability checks to be introduced to stop banks from lending to customers who might struggle with repayments, to prevent the banks from running into trouble should they be faced with a higher default rate.

The UK’s unsecured debt on credit cards, store cards, personal loans and car finance deals reached £200 billion this year, the same level it was at just before the 2008 financial crisis.

We can help.

If you’re one of those people struggling with unmanageable store card debt, there are options, however.At Get Help With Debt, we can write off thousands of pounds in debt and help you to manage the remainder, so it’s affordable for you.

Go online to our website and take our free online assessment, then book your free, no obligation consultation with one of our debt advisors to find out how we can help you.

Once you’ve met with your advisor we can present you with a range of bespoke solutions and you can make an informed decision about what approach is best for you. After that we do all the hard work, handling all third party communications for you, so you don’t have to deal with your lender anymore.So, go to www.gethelpwithdebt.co.uk and start the process of becoming debt free.

What is Negative Equity and why is it a problem?

Around the UK, many homeowners have found themselves trapped in negative equity since the property crash and recession ten years ago, but many people don’t know what negative equity is or how it can affect them and their finances.

Put very simply, ‘negative equity’ means that the value of something against which a loan was secured is now less than the outstanding balance. In the United Kingdom and Ireland, it is a term applied almost exclusively to property debt.

In the past, bricks and mortar were popularly seen as a safe investment, guaranteed to gain in value.Similarly, it was accepted that other things depreciated in value, often quite significantly. The market value of a car might drop by 20-30% as soon as it is driven out of the showroom. People understand this and factor this loss of value into their calculations whenever they decided to make an expensive purchase.

But property? That was different. Or, at least, so most people thought.

The recession which hit the UK in 2008 saw the value of many properties plummet. This left those who had taken out loans based on the pre-recession worth of their homes, with debts greater than the post-crash value of their property.

If, in 2006 to ‘07 when the British and Irish property booms were at their peaks, a buyer took a mortgage of £210,000 for a house, today valued at £140,000, they have a problem as selling their home will still leave them with a significant shortfall, which they will still have to pay back.

This is the main problem with negative equity, in addition to this significant loss, the amount raised from a sale at this stage would be insufficient to clear the outstanding debt to the bank of building society.

In the current climate those who have suffered are the borrowers who, in the days of ‘easy money’, took out loans of 90%-100% of the property’s value. From the outset, they were most at risk in the event of any fall in the value of property.

We can Help.

There are a number of possible solutions we can offer to resolve your property debt problems, depending on your circumstances, but for many of our clients a sale and settlement is the only solution to their problem.

We have successfully negotiated hundreds of cases every year where we have arranged the sale of our clients’ homes and reached an affordable debt settlement with the lender.

For other clients remortgaging might be their best option and, in some cases, we might pursue an individual voluntary arrangement, or IVA. This is a legal agreement between you and your lender and is suitable for people who have debts with multiple lenders.

Whatever your circumstances, the first step to dealing with your property debt is to contact Negative Equity UK for an initial free, no obligation consultation with one of our advisors.

Take a look at our reviews and call us on 0161 631 2727 or go to our website and arrange for us to call you at a time that suits you.

We offer solutions for unaffordable property debt.

At Negative Equity UK, when we meet our clients for the first time, they often tell us that they believe their situation is hopeless and they do not think there’s any way out of their debt situation. Many are worried that their debts will inevitable force them to go bankrupt.

There are, however, a range of solutions that can be pursued in order to deal with a property in negative equity. Once we have completed an initial consultation with our clients, we can begin to plan the best course of action for dealing with you problem debt.

Informal settlement.

For the majority of our clients, the best option available is usually a negotiated settlement with their lender. This involves the borrower selling the property and our team negotiating with the lender to write off as much of the shortfall from the sale as possible. This leaves our client with an agreed, affordable amount to repay either in instalments or as a single lump sum payment depending on what makes the most financial sense for them.

We often find that our clients are sceptical that a bank would agree to write down debt, but there are good reasons for them to do this. Repossessing a property and then paying someone to sell it for them is a long and expensive process for the bank and they rarely get the full market value for the house, so agreeing a settlement is often the best option for both parties.

An Individual Voluntary Arrangement.

An individual voluntary arrangement (IVA) is a legal agreement between you and your creditors. IVAs are a possible solution we would examine where a borrower owes money to multiple creditors.

Most types of debt can be included in an IVA, including mortgage debt, credit card debt, unpaid council tax or money owed to HMRC. An IVA might also be worth discussing if you own multiple properties with mortgages from different lenders, or you have unsecured debt from several creditors.

Once a settlement is agreed with your lenders it can be paid as a five year payment plan, known as a contribution IVA, or, if you can afford it, as a single lump sum.

Remortgage/restructure.

For most of our clients, it won’t be a good idea to try to resolve their debt problems by taking on more debt, in a few cases, however, it can be possible to deal with property debt by remortgaging.

While not suitable for everyone, restructuring your mortgage is an option that we might consider with clients who are struggling financially due to unexpected changes in their circumstances, such as a change in your work situation, if you have been made redundant, retired or had your hours reduced, or if your family is growing.We have successfully negotiated with many of our clients’ lenders to extend their mortgage term, allowing them to stay in the home they had worked so hard to secure.

What do our clients say?

One of our recent clients, Kerry, said this after we completed her case; “The service provided by Negative Equity was excellent. Despite all of my concerns and fears about the process they really went out of their way to provide excellent guidance and advice. They took their time explaining in detail the process, no question was left unanswered. My negative equity of £97,000 was reduced to £14,000 final payment. I can’t thank them enough.”

Contact Us Now.

We have successfully negotiated hundreds of cases every year where we have arranged the sale of our clients’ homes and reached an affordable debt settlement with the lender. Whatever the situation we will offer you a bespoke solution based on your own personal circumstances. The first step to dealing with your property debt is to contact Negative Equity UK for an initial free, no obligation consultation with one of our advisors.

Take a look at the rest of our reviews and call us on 0161 631 2727 or go to our website and arrange for us to call you at a time that suits you.

Universal Credit continuing to hit landlords’ finances.

The roll out of the government’s flagship benefit reform is causing financial difficulties for landlords as tenants receiving Universal Credit struggle to budget for rent and face delays in payments.

Universal Credit is intended to simplify the existing benefits system by consolidating a range of benefits, including housing benefit, into a single monthly payment. Previously housing benefit was paid directly to a renter’s landlord, but under the new system recipients are intended to be in control of their own money.

However, lengthy waiting times before an applicant can receive their first payment, administrative issues and problems budgeting for priority expenses, such as rent, has led to many people receiving Universal Credit falling into arrears.

According to the Residential Landlords Association, 38% of landlords with tenants receiving Universal Credit are owed rent, an increase of 10% on last year.

In an interview with the Guardian, one Croydon based landlord has revealed that she has been left with £9,500 in arrears after a tenant on Universal Credit was unable to keep up with their payments.

The landlord, who preferred not to be identified by her real name, said the council who arranged the tenancy had given her assurances that the rent would be covered by housing benefit. In January, however, the tenant was switched to Universal Credit and rent payments ceased.

Since then she has been unable to recover the arrears owed to her, leaving her £9,500 in debt.Richard Lambert, chief executive of the National Landlords Association, said; “Underlying all the problems with Universal Credit is the freeze on housing benefit rates, which means that the housing element of Universal Credit is simply insufficient for many tenants to be able to cover their rent.”

How can we help you?

At Landlord Debt Advisory, we offer bespoke solutions for landlords with problem debts. If you’re a landlord struggling with negative equity, under performing properties or the impact of recent tax changes such as Section 24, contact Landlord Debt Advisory for an initial free, no obligation consultation.

After we resolved his case, one of our recent clients said; “We contacted Landlord Debt Advisory as a buy to let property purchased in the housing boom left us with negative equity.“They dealt with our case very professionally and efficiently from start to finish. They had an in depth knowledge of what options were available to us and provided us with advice on the best option to take.

“They dealt directly with the lender and provided us with regular updates on the progress of the case. We got a great result in the end which has alleviated a lot of stress caused by being in negative equity.”

Check out our reviews and all us on 0161 222 4311, or go to our website and start the process of dealing with your debt.

Credit card debt spiralling out of control?

Northern Ireland has a serious debt problem. According to research by debt charity Step Change, the average amount of debt in Northern Ireland has now reached £14,367 and it’s growing.

Credit card debt is the most common form of unsecured debt people here are struggling with, with more than two thirds, 67.2%, of people who seek debt advice dealing with more than £8,000 in credit card debt.

With wages stagnant since the financial crisis a decade ago and the cost of living continuing to rise, it’s no surprise that many people have been forced to turn to credit just to make ends meet. With inflation rising and no sign of wage growth, the situation could still get worse.

In fact, with speculation mounting that the Bank of England might raise interest rates soon, many borrowers could find themselves having to pay more if their lender choses to pass on some or all of the increase to their customers. This won’t affect the rate you’re currently paying on existing loans, but if you borrow more money you could find it more expensive.

If you’re one of those people struggling with unmanageable credit card debt, there are options, however.

At Get Help With Debt, we can write off thousands of pounds in debt and help you to manage the remainder, so it’s affordable for you.

Go online to our website and take our free online assessment, then book your free, no obligation consultation with one of our debt advisors to find out how we can help you.

Once you’ve met with your advisor we can present you with a range of bespoke solutions and you can make an informed decision about what approach is best for you. After that we do all the hard work, handling all third party communications for you, so you don’t have to deal with your lender anymore.

So, if you’re in Northern Ireland and struggling with debt you can’t afford, go to www.gethelpwithdebt.co.uk and start the process of moving on from your debts.

More than a third of house sellers cutting asking price.

According to the latest housing market data published by Rightmove, 37% of sellers with properties already on the market have reduced their asking price since first listing, the highest rate in five years for this time of year.

Sellers are reducing asking prices by 0.8% on average, but Rightmove suggests that these reductions may still be too optimistic and many sellers will be forced to continue lowering their asking price in order to complete the sale.

Miles Shipside, Rightmove director, said; “Given that the market has been price-sensitive for a while and a five-year high proportion of sellers are slashing their prices, some sellers and their agents are over-pricing. These sellers may well be asking themselves if they could have saved some time and stress by pricing a lot more conservatively than an average of more than six percent ahead of what the market subsequently proved it could sustain.

“The danger of going too high at the outset is that you jeopardise that vital initial three week period, and may have to start on a series of price reductions while potential buyers watch and assume that no-one is buying your property because something is wrong with it other than the price.”

The rise in the number of house sellers cutting their asking price is going to add to worries for homeowners struggling with negative equity and other property debt problems.

The news follows the decision by the Bank of England’s Monetary Policy Committee to raise interest rates from 0.25% to 0.5%, putting up monthly repayments for many borrowers, and data from the Royal Institute of Chartered Surveyors showing that house prices are falling in areas across the country.

We can help.

Falling house prices will leave many homeowners with outstanding mortgage debt worried about negative equity.

Negative equity describes a situation where the value of a property is less than the amount still owed on the mortgage on that property. This can make it impossible for people to sell their property if they need to move on, or if their repayments become unaffordable, as the sale of the house will not raise enough to pay off the remaining debt, leaving the borrower still owing the shortfall.

At Negative Equity UK, we offer bespoke solutions to help our clients deal with their property debt.

If you are worried about the impact the rise in interest rates will have on your finances, take a look at our reviews and contact us on 0161 631 2727 or online at negativeequityuk.com to arrange an initial free, no obligation consultation.

Need Help With Debt?

Debt is a normal part of most people’s personal finances. Everyone relies on credit cards, over drafts, personal loans and mortgages at some point in their lives. Whether you’re renovating your house, paying for a holiday or just tiding yourself over until payday, everyone borrows.

For some people, however, debts can become unmanageable. Sometimes a pay cut or losing a job can make your repayments unaffordable. Sometimes low wages lead to chronic debt you can’t escape from.  Whatever the circumstances, we can help.

At Get Help With Debt, we can help you to write off thousands of pounds in debt and provide you with a range of options for dealing with the remainder.

For some clients a debt management plan might be what they need to get to grips with their debt. With a debt management plan, you will only have one monthly payment to make and you will only pay what you can afford until your debts have been cleared.

For others, an individual voluntary arrangement, or IVA, might be the best option. An IVA is a legally binding agreement between you and your lender and could make you debt free in as little as five years. We’ll stop your creditors from calling or writing to you to demand payments and freeze any late fees or charges you’ve incurred.

For a few clients, self-petition bankruptcy might be necessary. You will have to put any available disposable income you have towards this for three years, but you won’t have to deal with your creditors anymore and once your bankruptcy is completed you will be able to start fresh.

So, if you’re living in Northern Ireland and struggling with debt, whether your credit cards have gotten out of control, store cards are mounting up or you have a mortgage you just can’t afford, we can help you.

Go online to www.gethelpwithdebt.co.uk and take our free online debt assessment or request a call back to discuss your situation and take the first step to becoming debt free.